State Accounting and Budgetary Procedures

(a) For the purpose of compliance with the provisions of this subchapter, the following shall be designated as disbursing officers: (1) The executive head of each state department;

(2) The executive head, or superintendent, of each state institution; and

(3) The executive secretary of each board or commission having such an officer.

(b) The board having charge of any institution may designate any other full-time employee to act instead of the executive head, and the executive head of any other agency may designate any other full-time employee to act in his stead.

(c) All these disbursing officers shall be required to furnish bond to the state in the manner provided by law.

History. Acts 1973, No. 876, § 14; A.S.A. 1947, § 13-340.

19-4-1202. Designation of disburser.

(a) In the event appropriations are made available to a state agency or to a nongovernmental agency or activity and no disbursing officer is provided for by law, the Chief Fiscal Officer of the State and the Auditor of State shall designate a person to act as disbursing officer and fix the amount of bond for such purposes. (b) In the event that the General Assembly enacts legislation that provides for more than one (1) disbursing officer from a fund or fund account and there are insufficient funds available to finance all appropriations made therein, the Chief Fiscal Officer of the State shall certify the amount of funds and appropriations to be made available for each disbursing officer.

In the event the executive head of any state agency shall designate some full-time employee to act as his or her agent in the disbursement of funds under his or her control, then that agent may act without furnishing additional bond if the executive head of that agency shall notify the Chief Fiscal Officer of the State and the Auditor of State in writing of such designation.

(a) The disbursement of any funds in the State Treasury, of federal funds granted to the state or any state agency, of bank funds of any state agency, of trust funds of any state agency, or of any other special funds belonging to any state agency shall be done only by a bonded official or bonded employee in the manner prescribed by law. (b) Each disbursing officer or disbursing agent shall be required to furnish bond in the penal sum required by law or, in the absence of any law on the subject, in an amount fixed by the Chief Fiscal Officer of the State and the Auditor of State with a corporate surety company authorized to do business in this state and conditioned upon the faithful performance of his duties and for the proper accounting for all funds received and disbursed by him.

History. Acts 1973, No. 876, § 14; A.S.A. 1947, § 13-340.

19-4-1205. Signature or facsimile.

The original copy of all checks drawn in connection with the disbursement of public funds for which the disbursing officer is responsible shall bear the manual signature of the disbursing officer or his or her authorized agent, or may contain or bear a mechanically produced facsimile signature of the disbursing officer or his or her authorized agent. Where the Chief Fiscal Officer of the State has determined that the executive head of a state agency has established adequate internal administrative procedures and controls pursuant to law, which determination shall be made only after the Chief Fiscal Officer of the State shall have consulted with the Legislative Auditor, he or she may grant an exemption from manual signatures to allow for a computer-produced digitized signature of the disbursing officer or his or her authorized agent.

(a) The bonded disbursing officer for each state agency or the bonded disbursing officer for any regular or special fund provided for by the General Assembly shall be responsible and held accountable for the proper expenditure of the funds under his control. (b) It shall be the responsibility and duty of each disbursing officer or agent to:

(1) Keep advised as to the availability of the appropriations and funds for which he is the disbursing officer and be informed as to the legality of and authority for any obligations which may be incurred before any disbursements are made;

(2) Keep advised as to the laws or administrative regulations relating to general accounting procedures and restrictions for the disbursement of funds; and

(3) Certify that:

(A) Any disbursements which he or she may make are in accordance with the terms of any applicable contracts, purchasing procedure, or other authority;

(B) The services have been performed or the goods received; and

(C) The vendor or payee is entitled to the amount set forth in the check or voucher.

It shall be the duty and responsibility of the head of the agency for which appropriations are authorized and of the agency's disbursing officer to: (1) Be cognizant at all times of the resources available, including applicable fund balances, revenues, and other income, for financing the appropriations authorized by the General Assembly;

(2) See that no obligations shall be incurred which cannot be lawfully discharged from funds appropriated or available from other sources when they become due and payable; and

(3) Not operate the agency during any fiscal year from the then-current fiscal year's available resources at a level of operations that would require for the succeeding fiscal year funds in addition to those already authorized by the General Assembly.

The disbursement of funds authorized by the General Assembly shall be limited to the appropriations and the funds made available for the support of such appropriations. The restrictions of the Arkansas Purchasing Law, § 19-11-201 et seq., the Uniform Classification and Compensation Act, § 21-5-201 et seq., the Revenue Stabilization Law, § 19-5-101 et seq., and regulations promulgated by the Department of Finance and Administration authorized by law shall be strictly complied with in the disbursement of the funds.

History. Acts 1973, No. 876, § 14; A.S.A. 1947, § 13-340.

19-4-1210. Revenues insufficient to meet appropriations.

(a) The disbursements of funds shall be subject to the controls of the procedures authorized by this subchapter, other acts of the General Assembly, and rules and regulations established by the Department of Finance and Administration. (b) In the event that during any fiscal year the governmental revenues available to the state or a state agency are not sufficient to cover the appropriations made by the General Assembly from such revenues, then:

(1) The bonded disbursing officer for each agency shall be responsible and held accountable for the incurring of any obligations and disbursements of any funds in behalf of the agency for which he or she acts as disbursing officer. It shall be his or her duty to keep advised as to the amount of governmental revenues available for the operation of his or her agency. Each such disbursing officer is prohibited from incurring any obligations in excess of the funds made available by this chapter and other laws providing revenues for any such agency, and all such disbursing officers shall be subject to the restrictions and limitations of this chapter;

(2) The Chief Fiscal Officer of the State shall exercise the powers of his or her office to enforce the fiscal laws of the state to prohibit deficit spending and to promulgate rules and regulations which will require that all agencies comply with such fiscal laws. He or she may require, whenever he or she deems necessary, a financial report from any agency. If any such financial November 1, 2011 134

report or any other available information of any agency which has appropriated funds or an agency which has both state and bank funds shall reveal that the agency is in financial distress, then he or she may direct that all of the funds of the agency, including any bank funds, shall be subject to approval under the provisions of this chapter;

(3) If during any year it is determined that the proposed disbursements exceed the amount approved for that year, then, upon direction of the Chief Fiscal Officer of the State, necessary reductions in proposed disbursements shall be made;

(4) If, in accomplishing the necessary reductions in disbursements, it shall be required to reduce the salaries of employees, the reductions shall be made in proportion to existing salaries, and the reductions shall be made in the salaries of all employees, including administrators and directors;

(5) The Chief Fiscal Officer of the State is directed to withhold all distributions of special and general revenues as prescribed in this chapter and in the Revenue Stabilization Law, § 19-5-101 et seq., at any time that a state agency fails to comply with the restrictive provisions of this chapter; and

(6) It is provided that the creditors of any agency shall have first consideration in connection with disbursement of the funds of the agency. If the funds of any agency become depleted to an extent that the creditors cannot be paid from funds on hand or which will become available during the same fiscal year, the Chief Fiscal Officer of the State shall direct the agency to stop incurring obligations until the funds on hand and the funds estimated to become available are sufficient to meet all such obligations.

Arkansas law (ACA 19-4-1209) states: "The disbursement of funds authorized by the General Assembly shall be limited to the appropriations and the funds made available for the support of such appropriations. The restrictions of the Arkansas Purchasing Law, § 19-11-201 et seq., the Uniform Classification and Compensation Act, § 21-5-201 et seq., the Revenue Stabilization Law, § 19-5-101 et seq., and regulations promulgated by the Department of Finance and Administration authorized by law shall be strictly complied with in the disbursement of the funds."

If, during any fiscal year, it is determined that the proposed disbursements exceed the amount approved for that year, the necessary reductions in proposed disbursements shall be made upon direction of the Chief Fiscal Officer of the State.

Adequate internal administrative procedures and controls shall be established by each state agency executive administrator to ensure prompt and accurate payment of obligations.

Each state agency executive administrator shall ensure that:

Services, materials, supplies and equipment received comply with specifications indicated on purchase documents;

Quantities received, as indicated on the invoice, agree with those shown on the receiving report;

Unit prices agree with those indicated on the purchase documents;

The extensions and footings of the invoice are correct;

The check or warrant is prepared in sufficient time to take advantage of all available discounts being offered;

Sufficient legislative authorization for expenditures and funds is available for payment of the obligation;

The obligation was incurred in conformity with all purchasing and fiscal laws applicable to state agencies.

Procurement Codes

Procurement codes are used to assist in the tracking of procurement activity. Proper use of the codes enables the Department of Finance and Administration-Office of State Procurement (DFA-OSP) to automatically track purchases by category and provide required reports. Procurement codes must be included in all transactions paying for goods and services purchased by the State. Inquiries regarding further definition of these codes should be directed to DFA-OSP.

DFA-OSP maintains the "material master" list which is common to all agencies that lists all goods and services purchased by the State and gives a description of the goods and/or services, shelf life, material unit price, material group, unit of measure and re-order point. Requisitions and purchase orders (PO) must reference a "material master entry."

DFA-OSP maintains the "vendor master" list which is common to all agencies and lists all vendors for the State. A "vendor master entry" is required for any PO item, request for quotation of goods or services or request for proposals and payments.

All disbursements should generally utilize previously established vendor master record numbers, which is linked to the vendor’s master record. However, a "one time" vendor may be utilized when the vendor is expected to only be paid once, or the vendor is expected to be paid on a very infrequent basis.

Payments of invoices will be made based on the vendor’s due date and payment terms. November 1, 2011 136

Payments can be made to a vendor from multiple funds and funds centers.

Different payment methods are available – warrant by mail, warrant by Automated Clearing House (ACH) and check.

Warrants will have the invoice number, vendor account number and a 50-character text field on the remittance advice. The Auditor of State will print and mail warrants or mail direct-deposit advices with remittance statements.

Process Overview

The Accounts Payable Technician will enter and park the invoice or credit memo in AASIS. The document will be in the system but will not be posted until it has been approved for payment.

The Accounting Supervisor will review the invoices that have been entered and post them for payment. The payment run will be initiated to generate payments to vendors. (The Accounts Payable Technician and Accounting Supervisor cannot be the same person.)

The Accounting Supervisor will monitor the invoice entry and payment process as well as initiate the setup of recurring entry documents.

The Department of Finance and Administration-Office of Accounting-Service Bureau (DFA-OA-SB) will generate the warrant file and route the warrant file to the Auditor of State for processing of warrants.

R2-19-4-1210 Vendor Invoice with a Purchase Order

PLEASE NOTE: It is the recommendation of the Department of Finance and Administration-Office of Accounting (DFA-OA) to use the "vendor invoice with a purchase order" process whenever possible instead of the direct-invoice payment method.

Purchase Requisition

The first step in the procurement process is to requisition the purchase. Transaction ME51 is used to create the purchase requisition. The Agency Procurement Technician or State Procurement Specialist will make the requisition.

The purchase requisition:

Establishes a commitment of appropriations when the requisition is created.

Creates a unique requisition number for each requisition.

Allows users to suggest several potential vendors for items.

Tracks the progress of the requisition through AASIS.

The Agency Procurement Manager or State Procurement Manager will approve the requisition to be a legal expenditure of the State using transaction ME55. Invalid requisitions November 1, 2011 137

must be deleted to relieve commitment of budget. All approvals and rejections are date-stamped and logged by user ID.

Purchase Order

Once the purchase requisition has been entered and approved, the Agency Procurement Technician or State Procurement Specialist solicits quotes or selects the vendor using transaction ME41 or ME49 respectively and then creates the Purchase Order (PO) using transaction ME21N.

The Agency Procurement Manager or State Procurement Manager will approve the PO using transaction ME28 (RELEASE /APPROVE PURCHASING DOCUMENTS). Once the PO has been approved, the Agency Procurement Technician or State Procurement Specialist prints and sends the purchase order to the vendor.

Materials or Services Received

When the materials or services are received, the Agency Receipt Technician posts the receipt of the materials or services against the PO by using transaction MIGO (GOOD RECEIPT PURCHASE ORDER). The posting of the receipt of goods produces a posting in the GR/IR account. This posting creates the accrued liability and the expense of the goods until such time as the invoice is received and posted.

The MIRO (LOGISTICS INVOICE VERIFICATION) transaction is posted upon receipt of the vendor invoice, the entry into the accrued liability in the GR/IR clearing account is reversed and the entry to record the liability in the accounts payable account is made. MIRO is an automated 3-way match between the purchase order, goods receipt and invoice. If the match fails, the invoice is blocked for payment. Once the problem is resolved, the invoice is released for payment. After the document is posted the document number, verifying that the transaction has been posted, must be written on the vendor’s invoice.

PLEASE NOTE: Transactions in the GR/IR process do not reduce funds or appropriations but are only used to record the liability transactions of the invoice.

Invoices

An invoice is the evidence of an obligation as originally transmitted to the paying state agencies, whether in the form of a paper (hard copy) or whether electronically transmitted by data file, fax or e-mail that can be verified as an official obligation of the agency. Original invoices are necessary to issue payment. Paying from original invoices provides some assurance that an invoice is not paid twice and that the invoice has not been altered.

If the original invoice is lost, the vendor shall be contacted to provide one of the following:

A photocopy of the original invoice with the declaration:

"I hereby certify this duplicated invoice is an exact and true copy of the original invoice and that no payment has been received as payment of this invoice through the date of my signature."

Signed:
Name Printed:
Title:
Date:

Or, an additional original invoice with the same invoice number without any comments.

The method of delivery of the duplicate invoice is irrelevant. Electronic transmission will be acceptable.

PLEASE NOTE: Under no circumstance is an agency to self-generate an invoice or billing statement for the vendor.

R3-19-4-1210 Vendor Invoice without a Purchase Order

A purchase that has been made outside the Purchase Order System within AASIS may be made by the use of specific "Direct Invoice Payment" transactions in the system. Invoices that are not routine vendor payments, but rather small occasional purchases, reimbursements of employee expenses, etc. may be paid by using the direct pay invoice method.

Repetitive Expenditures

Repetitive expenditures such as utility billings, rent and other items of this nature can be paid with the direct pay invoice method; however, it is advisable to use the "funds reservation" to encumber the expected amount of expense for the annual expenditure.

The direct invoice payment method can be referenced to the "funds reservation" on the payment document to reduce the encumbrance. After the document is posted the document number verifying the transaction has been posted must be written on the vendor’s invoice.

PLEASE NOTE: Do not use the direct invoice payment method when a purchase order is required because entering an invoice directly into the financial accounting side that is intended to be against a purchase order will charge appropriations twice and does not link to the purchase order.

Cross referencing between the original evidence of indebtedness (invoice, contract, etc.) and the processing numbers assigned by AASIS is essential.

There must be maintained in the files of the agency, at a minimum, the following elements of information/documents related to all disbursements:

For the "Direct Payment" Process

Original evidence of indebtedness as enumerated in ACA §19-4-814 with the vendor number and AASIS document number appearing on the face of the document.

For the "Purchase Order/Credit Memo" Payment Process

The invoice and "goods receipt" with the vendor number and the AASIS document number appearing on the face of the documents.

DFA-OA-SB agencies may use the "Direct Invoice/Credit Memo" form returned by the Service Bureau as a cross-reference document, write the appropriate processing numbers (document number, etc.) on the invoice or other original evidence of indebtedness and retain for audit purposes.

Agencies that use AASIS (User Agencies) may print a copy of the screen when payments are processed to use as a reference form. The invoice or other appropriate number should be entered on the face of the original evidence of indebtedness.

The documents shall be filed either in numerical sequence, by document number (assigned by AASIS) or, if agencies file by vendor, by numeric sequence, by document number for each vendor in order in the applicable vendor folder.

Reporting agencies shall, at a minimum, maintain their documentation process in a manner similar to the payment process as recorded on AASIS so the documentation can be traced back to their original books of entry through the batch process posting and ultimately to the original invoice or payment document that supports the payment.